Bombardier making inroads into Russia

Bombardier Inc. announcement earlier this week that it was taking a stake in Russia’s United Electrical Engineering Plants [Elteza], the country’s largest rail signaling equipment producer, was a small, but strategic buy, according to Steve Hansen, Raymond James analyst.

No financial details were given, but Mr. Hansen estimates that Bombardier’s near 50% interest in the subsidiary of the state-owned Russia Railways is valued at up to $65-million.

“While Elteza’s relatively small size precludes any changes to our estimates, the transaction presents several positive strategic implications,” he said in a note to clients.

Not only is it a low-risk acquisition that will bolster Bombardier Transportation’s ‘modest’ exposure to the Russian market, but the country’s rail system is poised for an aggressive modernization, with about US$466-billion allocated for upgrades through 2030, he said.

Bombardier Transportation has also heralded such signaling systems as a growth area for the company.

Mr. Hansen has an “outperform” rating on Bombardier, and a $6.25 price target.